Talking About
Tomorrow
Kim Polese

A tech entrepreneur discusses
creativity,
values and the gold-rush mentality

MOUNTAIN VIEW, Calif. -- Kim Polese is a rich, successful and troubled
entrepreneur. One of the few female chief executives in Silicon Valley, she
is co-founder of Marimba
Inc., which makes tools that help big companies update their software.
Following its 1999 initial public offering, Marimba, with fewer than 200
employees, soared as high as $1.4 billion in market value.

Thirty-eight years old, Ms. Polese made her name as product manager for
Sun Microsystems Inc., where she
played a leading role in establishing the company's Java programming
language. She studied biophysics at Berkeley and computer science at the
University of Washington.

Along the way, Ms. Polese developed strong views about the future of
entrepreneurship and software development. But she also acquired nagging
doubts about the sustainability of the IPO boom, the sky-high Internet
market caps and the evaporation of social values in Silicon Valley.

She was interviewed in her office at Marimba on a morning when everyone
was running late due to severe -- and worsening -- local traffic
congestion. Following are some of the highlights of the conversation.

--Thomas Petzinger
Jr.

Can It Last?

The Wall Street Journal: We're
sitting right here at ground zero of what may very well be the greatest
explosion of wealth in human history. How long can it last?

Ms. Polese: You know, I wonder about
that all the time. It is in many ways obscene wealth. It's extreme. I can't
imagine people creating this kind of wealth long-term. This to me is
recognition of the importance of the Internet as a major cultural, social,
economic shift. And the people and companies who are at the formation of
that are being rewarded. But within the next five years, I believe that the
Internet will become an essential part of the way that any company does
business.

WSJ: It will recede into the
background?

Ms. Polese: Yes, you won't really
talk about an Internet company any more than you would have talked about a
company that uses electricity as an electric company at the beginning of
this century. When it becomes clear that brick-and-mortar companies can
compete, the smart ones can compete very effectively against some of the
new up-and-coming pure plays that have been anointed the next Fortune 10 --
I think that's when the speculative nature of this whole Internet space
will calm down. The solid companies will emerge. And I'm looking forward to
that, because it is sometimes frustrating to be lumped in with that sort of
Internet-company frenzy.

WSJ: So a gold-rush mentality has
taken hold -- a wealth panic?

Voices Events

Join Kim Polese, co-founder of
Marimba Inc. on Friday, Jan. 7 at 1 p.m. EST for a live online discussion
on the Silicon Valley culture and changes in the technology sector at
Voices.

Ms. Polese: There definitely is a
gold-rush mentality. There's also sort of a carpetbagger phenomenon going
on, where people all over the world are flocking to Silicon Valley. And
there's this belief that you can become a millionaire overnight.

WSJ: You can't get a hotel room
within 20 miles of this place.

Ms. Polese: It's crazy. You can't get
a restaurant reservation. You've got rush hour at 10 a.m. What's
interesting about it is that the technology that's supposed to make it
possible for us to live anywhere and work anywhere doesn't seem to ring
true here. Everyone is coming here to be together physically.

People Who Need People

WSJ: Why is it so important that
people come together physically -- even here, where you people design
products that are supposed to free them from doing so?

Ms. Polese: Because it's "the deal"
-- the value of meeting in cafes or in a bookstore or the grocery store,
the power deals that go down at soccer games here.

Ms. Polese: Yes, between the parents.
It's the birth of a new industry. And the power brokers are really out here
in that industry. That's human interaction. You can't do that through the
Internet or wireless or whatever.

WSJ: The need for human interaction
is especially great when the stakes are high.

Ms. Polese: Nothing will ever replace
it.

WSJ: The "full-bandwidth"
experience.

Ms. Polese: Right.

WSJ: You mentioned the birth of
electricity. Most technologies have periods of fabulous advance and then
they plateau. At what point does your industry -- I mean software and
computing -- begin to level out? How much longer can you live on Moore's
Law -- the doubling of computing power without an increase in cost?

Kim Polese

Ms. Polese: Well, there are different
angles on that. One is that you can't imagine how far miniaturization can
go. It seems almost infinite, when you imagine computing devices and
intelligence and access to the Net being embedded in everyday devices and
pieces of paper. There's a tremendous amount of research and development
and product development in companies. So on the one hand, I don't see an
end to Moore's Law in sight today on just how far the technology can
go.

However, when I think about basic connectivity, and I think about just
the devices we will use to communicate with each other -- the cell phones,
the PDAs [personal digital assistants], the wireless -- at some point that
will reach a saturation level.

WSJ: And then?

Ms. Polese: At that point, what will
really add value will be the services that companies offer. We're already
seeing that happen in every industry here in Silicon Valley. Even a company
like Intel, for example, a venerable hardware developer, is now getting
into providing outsourced application services. I mean, what a radical
shift! It gives you an indication of just how seriously companies are
taking this services model.

So when I think about the companies that will do well in the growth
industries, I think about the companies that will be really sharp,
super-smart, about putting together unique services that no other company
can match. We are seeing the beginnings of this with the free PC -- you
know, giving away PCs so that you can stick the needle in the arm and get
people to sign up for the Internet service. And then we are going to see
layers on top of that, many layers on top of that. Instead of basic
Internet connectivity, how about a service that manages your finances? Or
the game channel or whatever. It is the transaction level. It is the
monthly fee. It is the subscription. It is being attracted to a service.
And then a company that succeeds will be the one that locks you into that
service.

You can see it already in the value Wall Street attaches to pure
software and pure hardware companies vs. companies that are incorporating a
services model in their business. Instead of throwing that product over the
wall to a company and making them install it and learn how to use it, you
set up a service and enable companies to subscribe.

Latter-Day Leonardos

WSJ: Do you think software
development as a skill, as a career, will remain as vital as it is today?
Or is there a point at which software development becomes like
manufacturing, or like agriculture before that: something so automated that
it recedes into the background of economic life?

Ms. Polese: I think that
software-coding tools will get better and better. The libraries of code
will get more and more complete and easier to interface to. So I do believe
that there will be armies of software programmers who can go to trade
school to learn how to create these programs, and these applications. But
even stretching way into the future, there will be a need for creativity --
the creativity of thinking about the architecture of a software application
or device or network. That's where the brilliance will still be required,
for decades and decades and maybe millennia to come. There's a creative
aspect to software development that I think many people aren't aware of. In
fact, in our own company here and in other places in the Valley, many
people I know who are software developers are also musicians and artists
because it is spatial reasoning, it's patterns, it's fluidity. There is a
lot more to it than just sort of cranking out boring code.

I think we're actually just at the beginning of seeing a whole
generation of da Vincis in software development, the creative part. It's
about envisioning patterns and architectures and the way networks work
together.

WSJ: So these da Vincis, their "Last
Supper" would be what -- the architecture for some sort of application?

Ms. Polese: Yes, something like Java.
Or you look at Linux and how Linus Torvalds is gaining tremendous
attention. [Mr. Torvalds is the originator of Linux, a free operating
system built by volunteer collaborators around the world.] He was at the
birth of something that will be clearly becoming a very key part of these
systems that will run the network.

WSJ: Do you think we're reaching a
point where creativity threatens to overtake capital as the main constraint
in commercial life? Isn't it easy to imagine that the real value will
increasingly come not from people who can get the money together, but from
those who can bring the brains together?

Ms. Polese: Yes, absolutely. Again,
it's one of the reasons people flock to Silicon Valley: the knowledge of
where the brilliance is. In fact, when I think about the kinds of companies
that will exist, and even when I think about how we're going to grow our
own company, more and more we'll go outside of this region to have
programmers located in other parts of the country and other parts of the
world. We become a virtual team in many ways. It is becoming more and more
possible. And even with the services model that I talked about earlier, you
can have people in far-flung places who are providing a service, like
customer support, or running a server and providing data back-up, that
don't have to be located here.

WSJ: A minute ago you mentioned
Linux. Do you think we're going to see more and more development conducted
through open-source-type initiatives -- giving away software code so anyone
can make improvements?

Ms. Polese: I do. Because every time
some company tries to do something proprietary, there's a whole wave of
people, companies, the industry, that rises up against that. We've all
lived through proprietary interfaces and hardware platforms and operating
systems, and it's a nightmare. Java was a response to that, and Linux is a
response to that. That's the power of a large group of people banding
together, creative people, who have been burned before, who want the right
thing to happen, who want the Internet to be truly ubiquitous. It's an
amazing thing.

Free for All

WSJ: What's the open-source movement
telling us about the future of commerce, when these people give away so
much work with no assurance of a personal financial return?

Ms. Polese: Because the formula
works. It is being proved again and again -- with Java, with Netscape,
others. Look at Sun and how it has profited from Java. Not from a pure
dollar exchange for Java itself, but for all the businesses that it can now
build on top of that platform. There are many examples now over the last
couple of years that show very clearly that huge multibillion-dollar
businesses can be created, wealth can be created. And, in fact, when we
left Sun at the end of '95 to start this company, we were looking at the
proliferation of Java everywhere. We knew that a lot of people were going
to build great companies on top of Java.

WSJ: That's why you formed
Marimba?

Ms. Polese: Exactly. Anytime that
there is a platform that connects so many people, platforms, networks,
hardware architecture, operating systems, there is wealth that will be
created on top of that. And those who are present and part of creating the
basic platform have a better vantage point.

WSJ: But you have to give in order to
get, right? You have to give something away with the prospect, but not the
assurance, of a return. Doesn't the concept of return on investment fall
apart in a world like that?

Ms. Polese: Yes, but this industry
right now is so much a game of being a step ahead of anybody else and
seeing the opportunity first. Because all the development is happening so
fast. The speed, the pace at which we are moving, is incredible. It is
breathtaking. Anyone you talk to in this valley, the most plugged-in people
in the world, will tell you they can't keep up with it. So the key becomes
being the first to see a trend, being the first to be part of creating a
trend -- and then capitalizing on that trend. And that all happens within a
very compressed time period. So that's why there is value associated with
giving something away free. You can see what comes after that.

WSJ: These days, business models have
a half-life of about five minutes. Is that mainly because we are in a
turbulent transitional time, or has the concept of corporate strategy been
permanently changed to something without fixed goals and plans?

Ms. Polese: It's the network. When I
think of what's making this happen, what is causing that change, it is the
power of the network, the fact that the best-laid plans might be totally
worthless six months from now because there is some new open-source
movement that occurred and now there are 100,000 programmers who are
developing a product that competes directly with yours -- which was
proprietary. The shifts can come so suddenly and be so huge you can't
predict anymore what should happen in an orderly fashion. And so any
company that has a hope of surviving in this industry has to fundamentally
re-examine its strategy on a monthly basis. It's not a badge of shame to
change your business plan or throw away the old ideas. It is a badge of
courage, really, because you're dead if you don't.

Booting Up

WSJ: You were part of a large
organization, and you and your co-founders sprung out like a dandelion
seed. How quickly are the barriers to entry declining in this and other
industries generally? Even while the big get bigger, are we at the
beginning of a secular wave in entrepreneurship?

Ms. Polese: I think it's already a
tsunami. If you look at the number of IPOs that are stacked up this year,
it is just staggering -- so many start-up companies that the market is
saturated. In some ways, I think what we are seeing today is definitely
going to slow down from an IPO, public-market perspective. And a lot of
these companies will fail. A lot of the ones that have gone public and will
go public in the next year will fail. They shouldn't be public. It's
premature.

WSJ: But that's just one layer of the
entrepreneurial world. For every company that goes public, there are
thousands formed that never do.

Ms. Polese: That's very true. That's
something that I think we'll continue to see more and more of. It's because
a core team of people, just a very small team with an idea and a passion
and talent, can do amazing things that could take a large company five
years to do.

WSJ: From all you see around you
here, how much of the entrepreneurial motivation is driven by freedom and
personal fulfillment? How much of it is driven by the money?

Ms. Polese: It is a question I ponder
a lot as I'm stuck in traffic on [U.S. Highway] 101. I worry about this
because I feel more and more the greed factor and these absurd expectations
that you should be worth $50 million by the time you are 30, or you have
failed in some way. And the young people coming out of college and applying
for jobs for the first time, this is their first experience. They think
this is what the real world is like. It's not!

You look at an Andy Grove, a Scott McNealy or a John Chambers [of
Intel Corp., Sun Microsystems and
Cisco Systems Inc., respectively],
and they worked for decades to get to where they are. And going public
after five years was considered very aggressive. And if a stock climbed $10
within the next five years, it was a great thing. So I think we really are
in a period of irrational exuberance, as [Alan] Greenspan would say. Or
just pure insanity. And the greed factor is definitely there. I worry about
it also because I grew up here in the Bay area, and I see this place
changing around me. And I know I am part of the problem, I am helping
create the problem in many ways by hiring people, bringing them here.

WSJ: You're telling me that you see
electrical-engineering graduates who think they ought to be millionaires at
23?

Ms. Polese: You're seeing research
scientists and Ph.D.s who would be doing R&D, but who now see the lure
of becoming a billionaire. And they know they can go and do it. So we are
even seeing the drain happen in real time from Ph.D. programs and master's
programs, people who aren't even completing their education because they
see the opportunities. I can't say I blame them, but I also worry about
where the R&D is going to come from. As a country, we haven't been
putting money into basic fundamental research and development. The
companies are focused on product development. The big ones like Microsoft
can afford to do R&D, but that's Microsoft's domain -- it is not the
industry's domain. So I worry about creativity and innovation, and not only
from a return to those values and absence of those values, but also where
the new Internets are going to come from.

Majority Rule?

WSJ: The proportion of women in the
sciences generally, and studying computer science in particular, is not
only disproportionately low, but continuing to decline -- even now, in this
high-tech economy. Why? Do you have a theory?

Ms. Polese: It's that technology is
scary. To some degree, at a certain point for girls in school, math and
science and technology become something to be afraid of, something that is
not engaging and fun but complicated and hard and scary. I have to look at
the culture. I have to look at the media. I have to look at advertising. I
have to look at the images that are put in front of girls about who they
should be and what they should be, and it's all about how you look. And
even a female executive in this industry gets a tremendous amount of
attention focused on that. If you go on the chat boards, after an
appearance on CNBC, everybody is talking about...

WSJ: How what a hunk Bill Gates
is?

Ms. Polese: Right, or saying, "Boy,
he's put on 25 pounds!" Unfortunately, this society still tells girls that
what matters most is how they look. And that the ultimate achievement is
becoming a sex object to be admired and desired.

WSJ: But, certainly, the number of
women going to college isn't declining, or the number studying the
humanities. So it's not like the culture is saying, "Just be an airhead."
There is something about technology that's putting off girls.

Ms. Polese: I think it's what I was
saying earlier, that computers are still hard to use in many ways. It still
scares children. I think at a certain point guys, boys, don't get
scared.

I think about when I was a kid and I grew up in Berkeley, the reason I
didn't get afraid or turned off of technology was there was a science
museum called the Lawrence Hall of Science here, which is like the Boston
Computer Museum. And I went up there as a kid, and I played on the
computers. There was a really fun game called Eliza, which is as it turns
out one of the first really significant AI [artificial-intelligence]
programs. It was a fun game, and that was my first interaction with
computers. This was a place that made science fun. At that critical time
when a girl is 12 or 13, she's asking, "What am I good at? What can I do?
What can I be?" We need to make sure that girls as well as boys have had a
chance to see technology as something fun, science as something engaging
and creative and amazing.

WSJ: What do you think are the
consequences of the fact that women are drastically underrepresented in
these fields? Are there social consequences?

Ms. Polese: Certainly, one obvious
consequence is that there won't be many women running large technology
companies.

WSJ: Or acquiring billion-dollar
fortunes.

Ms. Polese: That's right. And if you
look at a lot of the kingmakers today in this industry, it's the heads of
telecommunications, the networking companies. We are seeing women start to
appear in e-commerce companies. But when you look at the fundamental
infrastructure and the build-out of the Internet, the technology side, you
see very few women playing an important role there. So that is one obvious
consequence. Knowledge of the systems will still be an increasingly
valuable commodity. The people who understand how these systems work and
can architect them will be valued tremendously, and they'll be at the heart
of many great companies to be built. So one consequence is we won't see
women doing that.

WSJ: Are there even consequences for
the technology itself?

Ms. Polese: Technology is technology.
A line of code is a line of code. So I am not sure I really see a
difference in the technology itself. Perhaps there is an effect in the
companies, because I think women do have in many ways a different
managerial style that is less confrontational and that can still be very
decisive and powerful, that involves seeking out ideas and opinions from
many. I hate to make generalizations like that.

WSJ: Yeah, they're dangerous, but the
reality is that there are differences in the aggregate. And some of them
show up in the workplace.

Ms. Polese: Right. And when I think
about what will be important in companies today and certainly in years to
come, it will be making sure that you're tapped into the creativity in
every part of your company, that you're hearing from not just the
lieutenants around you but from the people who are actually out there
learning, especially as this industry is changing so rapidly. At this
company, I make a real effort to connect with every employee and to learn
from them and to ask them questions, because the insights you can gain are
tremendous.

Leading the Charge

WSJ: Let's stay on the subject of
leadership. What does the furious rate of change sweeping organizations
imply for the leadership of those organizations?

Ms. Polese: Well, organizations are
smaller and faster moving, so people leading these companies have to be
willing to immediately admit making a mistake and change course radically
and regularly. So that is one trait of leadership that is very different
from the old world, where you had a 10-year plan and you stuck to it, and
you never admitted failure. Out here in Silicon Valley, failure is a badge
of courage. It is to be admired. When I look at resumes of people that I am
hiring, if they have been through at least one failed start-up that is a
plus, a big plus. That is a gold star.

WSJ: Because failure is a great
teacher?

Ms. Polese: Exactly. And they've
probably seen situations in which change wasn't made, where there wasn't
that ability to do a radical course correction or throw away the old
business model. And that's absolutely key. Now, that's not to say that
leadership means zigging and zagging. You still have a vision. You still
keep checking in with that vision and making sure it's the right vision.
You adjust it if it is not. But you often have to make radical changes in
your pursuit of that vision because the industry is changing so much.

WSJ: How about creating an
environment where creativity happens? When people were extensions of the
machine -- whether the machine was a typewriter or an assembly line -- you
had to operate within a job description. Now companies have to innovate
constantly. They have to use the eyes and ears of all their employees as
sensors for the external environment. And they have to bring multiple
brains together and diverse brains together in order to create. You can't
do all that with just stock options, can you?

Ms. Polese: After a certain point,
you can't, because people get burned out. We are all running at a
tremendous pace here, and there is always the new challenge, the new peak
to scale. You never rest. So quality of life becomes important. And good
companies will spend a lot of time constantly working on making it even
more enjoyable to be an employee, whether that means telecommuting two
times a week or different work hours. You know, fun stuff that brings
people together. A sense of fun in the work place. A gym. Massages. Games.
The things that I think the venerable East Coast firms might turn their
nose up at. It turns out that you get a tremendous amount of productivity
out of people if they feel it's a place that's welcoming, that values them.
And a lot of people almost live here. We have a couple of people who have
literally lived here, while trying to find a place to live in Silicon
Valley. It is a different kind of work environment than that of the
past.

WSJ: Is there such a thing as a
culture of creativity in an organization?

Ms. Polese: I think there is.

WSJ: Or a culture that can nurture it
and a culture that can deaden it?

Ms. Polese: Yes, there are companies
where you feel inherently when you walk in, that creativity is valued and
is nurtured. And there are others where you don't feel that. So it comes
from the top. And it is borne out in regular daily examples of rewarding
people for creativity and creating environments. Brainstorm sessions,
brown-bag lunches and inviting people in. Exchanging ideas. Walking the
halls and asking employees opinions on things. You feel it, and it becomes
something that is inherent to the company.

Beyond Bucks

WSJ: Do you think values will play a
more prominent role in the workplace? I mean not just the quality of my
workplace, but the role of my organization in society? Do people care about
that stuff, or are they too busy following their stock price?

Ms. Polese: I think at the beginning,
in the froth-and-frenzy phase, people don't think about that. But that is
what keeps people at a company, a feeling that this is a company that is
changing the world, and I want to be part of that. This is not just a job,
really -- this is a life experience. At least, that is the way I view what
work should be, because it's most of your waking hours. And it's my
objective to create an environment where very strong values are understood
by the whole company.

We are changing the world. We're creating an infrastructure that will
make it much more possible for businesses to deliver powerful service in a
cost-effective way. But separate from that, we are a company with ethics.
We are a company that deals fairly with people, with other companies, where
values like execution and follow-through, instead of concept and hype,
define what we are. That's something people need more and more in this day
and age, in this environment, in this industry -- the values that feed us
at the core as human beings, connections with other human beings, a sense
of belonging. And I think in this environment we are not seeing a whole lot
of it. But in years to come, I think we will see more people caring about
that.

And I think there will be a backlash against all the greed. I think
people are going to get just fed up and realize it is not fulfilling. I
look around me, and I have so many friends who started companies who are
worth $50 million and more, and they are depressed. They think that they've
made it, and they take six months off and they realize they're more
depressed than ever. Because this wasn't really what ultimately it turned
out that life was all about. I look around me and I see unhappy
billionaires, and I see them coming back again and again to start another
company. And what really attracts them is connecting with other people. It
is the team. It's creating something. It's having a mission. That's what
turns people on. That's what life is about.

WSJ: In Silicon Valley, at least, it
seems the path of entrepreneurship is building something fast and selling
it fast -- then you have a big party and build something again.

Ms. Polese: I think about that a lot.
I mentioned Andy Grove earlier; even in this world of compressed time, it
still takes years to build a great company, no question about it. You can't
get past basic requirements like building a revenue base, creating new
products, attracting great employees, retaining the ones that you have,
having the vision that makes sense, having the smarts to make the right
partnerships in the industry. People don't do that anymore. The
entrepreneurial common wisdom is that the most important thing you do when
you're starting is deciding on your exit strategy.

I really deplore that. Because no matter what the exit strategy is, no
matter whether you sell your company a year from now, if you are not
focused on building something great, if you are not focused on the long
term, I think you are selling yourself short. And I think you are selling
your investors short, or not doing what you could.

WSJ: You're exiting on the low
road.

Ms. Polese: Yes. I hope that out of
the companies starting up today we'll see the venerable Ciscos, Suns,
Intels and H-Ps [Hewlett-Packard] coming out. But I worry that those values
have seemed to be tossed aside so quickly. I think it is going to take a
lot of companies failing for people to return to the idea that it really
does take years to build something great. It does take commitment. Here at
this company, I always focused on the long term, and we have as a company
been focused on that. That's hard when around you people are becoming
billionaires overnight, and your employees are being recruited away. It's a
very strange environment. So, we really have to focus on the old-fashioned
stuff: loyalty, trust, delivery, execution.